If Life Insurance Plans Were Cars: How to Look at Various Types of Life Insurance in Canada

Overall, insurance is considered a somewhat boring, though necessary, topic. On top of that, it is not always clear – there are plenty of various types of life insurance products in Canada that work differently. I decided to explain it in a bit of a different and funny way – I hope that you will like it.

Imagine that an insurance policy is not a boring document, but a car: which one will you choose for your life journey?

Insurance Type

Car comparison

Types of Life
Insurance in Canada

Term Life Insurance

Imagine it as a Mazda – a simple, reliable, and an affordable vehicle.

Term Life insurance is purely an insurance product – there is no cash aggregation or other add-ons. If a policyholder dies within a pre-determined time frame (also called term), the policy pays.

Whole life insurance is the most expensive town car option. It can take you far and you are chauffeured by a driver. It offers extensive service and warranty options.

That comes at cost, though, and while you can always sell the car if you want, don’t you really just need to get from A to B?

Whole life insurance is a combination of an insurance and financial product – the policy covers a policyholder life-long and accumulates some cash value.

It is one of the most expensive insurance options, especially participating whole life.

This insurance means higher premiums, but generally level premiums for life (i.e. the premiums do not change) among numerous other guarantees.

Universal Life Insurance

Universal Life is a bit like a large SUV: it comes at a higher cost, has a variety of built-in options, and it has a large tank that can take you far.

The vehicle is good for premium holiday trips and off-road journeys – it is your choice.

Universal life insurance is a combination of an insurance and financial product (similar to whole life insurance) as it accumulates cash value.

Unlike whole life insurance, though, universal life insurance is more flexible and allows you to choose the amount you contribute every month. In other words, you can adjust your payments to your budget and needs.

Accidental Death Insurance

Accidental death insurance is like a golf cart. It will not take you too far, and in most cases, there is not too much use to it. Want to go far? Nope. Want to transport furniture? Nope. Want to drive in the winter? Better not.

Further, it is not even cheap to get and maintain.

Accidental death insurance is a life insurance policy that pays only if the death occurred due to an accident (approx. 5 per cent of all the cases) – all other cases are not covered.

The policy is not cheap, and it comes with several exclusions.

Mortgage Insurance

Mortgage insurance is in fact similar to an ATV – it seems like a good idea if you are buying a cottage, but at the end of the day, you’ll find you are paying for nothing because it only can be driven for very particular purposes only.

Mortgage insurance is often sold when you purchase a property, but it is normally not the greatest product. It covers only your outstanding debt to the bank as related to the property, and its coverage value becomes smaller and smaller as you pay off your mortgage. Also, it’s important to mention that it is not a cheap product because you always pay a blended rate (for smokers and non-smokers).

No Medical, Simplified Issue Life Insurance

No medical simplified issue is your typical rental car. The costs are not cheap, but it is good for specific purposes.

Can’t get your own car? You need only a driver’s license and a credit card to get a rental. There are no driving history checks, but there are often limitations on how far you can drive and what countries you can visit.

No medical simplified issue is life insurance that comes without a medical exam; it only requires a future policyholder to complete a short questionnaire.

The costs are higher than a standard life insurance policy, and coverage is often limited to 300,000.

No Medical, Guaranteed Issue Life Insurance

No medical guaranteed issue is like your Car2Go rental vehicle. It is good for some very specific purposes, but if you drive with it a bit further/ longer, it will get really expensive, and the range of how far you can drive (to return the car) is limited to the central part of the city.

No medical guaranteed issue does not require any medical exam or completed questionnaire, but it does cost significantly more than other insurance types, and it has a lot of limitations (e.g. coverage size). Its coverage often does not exceed $25,000.

Group Life Insurance

Group life insurance is like a bus – there are minimal costs for you, and it is good and reliable—as long as you need to get to a destination along the bus route.

Obviously, your options are limited because you are in the bus with many other passengers.

Group insurance is provided by an employer or association and comes at no cost, or at a low cost that is subtracted from your salary.

It covers you to some extent (although, often, coverage is not that extensive), but once you leave your job, you’ll lose it.

We hope that this overview will allow you to navigate the complex world of life insurance. Should you have any questions or want to decide on the type of life insurance you need, our experienced life insurance brokers are happy to answer your questions and provide you with an affordable life insurance quote that is tailored to your needs.